Sound Mortgage Planning Blog

The U.S. Department of Housing and Urban Development has just released a new mortgagee letter regarding Risk-Based Premiums for FHA Mortgage Insurance.

What it says: "Effective with new FHA case number assignments on or after July 14, 2008, FHA will implement risk-based premiums on one- to four-unit single family mortgages." 

and 

"UFMIP will range from 1.25 percent of the loan amount for lower-risk borrowers to 2.25 percent for riskier borrowers."

The Good News: If your client is coming to the transaction with a credit score 600 or higher they may have a reduced Up Front Mortgage Insurance Premium (UFMIP) of 1.250% of the purchase price. This is down 0.250% from the current 1.500%. If they are bringing in at least 5% for a down-payment, they will likely continue to see the same monthly Mortgage Insurance Payment (MIP) based on the current calculation of 0.500%.

The Not as Good News: Going with the same information above, if the client is bringing in less than 5% down, they may see their monthly Mortgage Insurance Payment (MIP) based on 0.550%, an increase of 0.050%.

Clients with credit score below 560 may see an increase in both the Up Front Mortgage Insurance Premium (UFMIP) and the monthly Mortgage Insurance Premium (MIP) unless the client is bringing in a down-payment of 10% or more.

If you have a client that has a lower credit score and is wanting to purchase a home with an FHA backed mortgage, now is the time to purchase before they are affected by the new change.

The matrix provided by FHA goes into greater detail and if your not sure what this may mean to you or your clients, please call.

I can be reached at (360) 528-3146.

Take care,

Shawn Anderson